Building a home is a dream and one of the most significant achievements of several individuals. However, individuals need a large amount of money for it, and the most viable option available is taking a loan. In such situations, a home loan against property is preferred by most individuals as it is more readily available due to its less stringent eligibility criteria.
Why should borrowers take a loan against property?
A mortgage or loan against property is a secured loan that borrowers can get by keeping a commercial or residential property as collateral. Besides a borrower’s eligibility, the loan amount depends on the market value of the property that the borrower mortgages.
The greatest advantage of this loan is it comes with no end-usage restriction; thus, one can use a loan against property for home renovation, higher education, go for a vacation or even buy a new home or land.
Building a house needs a good amount of funding, and both secured, and unsecured loans are available for customers. However, low LAP interest rates are another reason why borrowers prefer it.
Loan against property interest rates is lower than unsecured loans due to the decreased risk factor. Since a borrower keeps a property as collateral, lenders offer lower interest rates. In case of a default, a lender has the right to sell the mortgaged property.
What Are the Things to Do Before Applying for a Loan Against Property?
The things borrowers should do before applying for a loan against property are given below:
Plan the loan
Borrowers can use an online LAP EMI calculator to get an idea of their monthly EMI payments. These calculators are available on the websites of financial institutions and are easy to use. In addition, borrowers can select a repayment tenor and interest rate so that the resulting EMI fit their budget comfortably.
Conduct thorough market research
The first step for borrowers is to conduct thorough research about the different lending institutions. Individuals should compare the applicable rate of interest, check reviews about the lenders, and know what the charges on LAP that they have are. Then, on finding a few lenders that meet the borrower’s needs, one should shortlist a few from them.
Know the market value of the property
The maximum loan amount a borrower can get for a LAP depends on the property’s market value. This is also known as the loan to value ratio; however, the final loan amount approved by the lender will also depend on the borrower’s eligibility. Borrowers can use online LTV calculators to get an idea of the maximum loan amount they can get. If borrowers apply for a feasible loan amount, the chances of loan approval increase.
Check borrower’s eligibility
Although the eligibility criteria will differ for every lender, borrowers can use online LAP eligibility calculators to get an idea of how much loan they can get. Knowing the loan amount they are eligible for will help the borrowers decide on the loan amount better and negotiate with the lenders as well.
Check documents required
Borrowers should check the list of documents required for property loan and make sure they are available with them before applying. Submitting the correct required documents will increase the chances of loan approval and further expedite the process.
Besides, borrowers can check their pre-approved offers, which different financial institutions provide. These offers are available for secured and unsecured products and further expedite the loan process. To check their pre-approved offers, borrowers can visit the financial institution’s website and find the pre-approved section. Then, they need to enter their names and contact numbers in that section and see the offers. A home loan against property is a big financial decision that any individual takes. It will involve locking up a part of their income for a long period of time. So, one should apply for a loan only after being sure about repaying it.